Weekly Supply Supply Chain Update: 18

WCI Spot Rates continue to to slip

Last week’s WCI spot rate index from Drewry continued to show declines in rates, and with the recent resolution of the strike, there is little expectation for any significant rate increases in the near term. Despite these ongoing declines, it's important to note that deep-sea shipping rates from Asia remain above the levels seen at the end of April, just before the peak season began.

• Demand is trending downward as China observes holidays, leading to increased vessel availability and carriers actively seeking cargo.
• Floating rates have continued to decrease in the first half of October. Spot pricing has remained steady for the past two weeks, influenced by the holiday slowdown. Carriers are now more proactive in adjusting rates to optimise vessel utilisation.
• While equipment shortages are nearly resolved, some ports of loading (POLs) with fewer direct calls may still experience occasional shortages due to rerouting via the Cape of Good Hope.

Geopolitical tensions:

Taiwan Braces for Potential Disruptions:

• Taiwan is on high alert due to possible missile strikes from China. The ongoing military exercises around the island could lead to significant disruptions in crucial shipping lanes, leaving the maritime community concerned about the impact on global trade routes.

Concerns Over Russian Aid to Houthis in Yemen:

• The U.S. has raised alarms over potential Russian military support to the Houthis, which could escalate the conflict in the Red Sea. This critical trade route, vital for global maritime traffic, might see further volatility, threatening international shipping.

Iran’s Missile Barrage on Israel:

• In a dramatic escalation, Iran launched over 180 ballistic missiles at Israel, bringing the region to the brink of widespread conflict. The Strait of Hormuz, a key route for oil shipments, may face heightened risks, affecting global energy supplies and shipping routes.

U.S. Navy’s Defense Against Iranian Missiles:

• The U.S. Navy’s interception of Iranian missiles aimed at Israel marks a critical moment in the conflict. The global shipping industry remains on edge as security forces work to protect vital maritime routes.

Political Tensions:

• The strike at US East and Gulf Coast ports has ended following a tentative wage agreement between the International Longshoremen’s Association (ILA) and the US Maritime Alliance (USMX). However, there is still a significant backlog of over 40 ships waiting to unload cargo, and more than 120 vessels are en route (as of 04/10). The agreement also extends the Master Contract until January 2025 to allow further negotiations, particularly around port automation. Analysts, like Peter Sand from Xeneta, have warned of continued disruption, noting the ripple effect on global supply chains. Delayed ships will also affect schedules in the Far East, with potential impacts lasting into 2025. Shippers have already felt financial consequences, with freight rates rising by 58% for North Europe to US East Coast trades since August. While the end of the strike is positive, challenges remain, especially with unresolved issues around automation, which could trigger further strikes if not settled by early 2025.

New Break Bulk Indicies

Drewry has launched new Breakbulk Sea Transport Indices, replacing the previous Multipurpose (MPV) Time Charter Index, to offer deeper insights into the Project Cargo and General Cargo markets. As project cargo continues to outpace general cargo, Dr. Ferenc Pasztor, Head of Ports and Specialised Shipping Research, highlights the stronger market for project carriers. The new indices, part of Drewry’s Multipurpose Shipping Forecaster service, expand beyond vessel charter rates to cover freight markets across various vessel categories, providing valuable guidance for the evolving shipping industry. Updated monthly, these indices reflect Drewry’s commitment to enhanced market analysis.